Indian family biz not-so-strong on succession

Family businesses in India have seen rapid growth in recent years but only less than a third of such enterprises have succession plans in place, according to global HR consultancy Hay Group.

Also, managing succession in a family business involving family members is more complex, said Hay Group India’s Director and Building Effective Organisations Practice Leader Mitali Bose.

Noting that family businesses in the country have grown rapidly in the last few years, she, however, said less than “a third of family businesses (in the country) have succession plans place”.

Global research by the group found that only 19% of family owned businesses have a plan when a generation retires and similar trends also play out in India.

“... the number of times and occasions when the next generation/a sibling has taken over the business in the wake of crisis brought on by the sudden passing of the managing family member/patriarch stands testimony to the fact that this continues to remain a much neglected area of planning and foresight,” it said.

Typically, a family owned business evolves from controlling owner stage to the sibling partnerships level and finally to cousin consortium stage.

“The first generation builds, the second expands and the third destroys. This is a universally acknowledged phenomenon; that few family-owned businesses survive beyond the third generation,” Hay Group said.

Citing its research, Hay Group said more than 72% of family owned businesses do not survive beyond the thirdgeneration.